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Generalized trust and wealth

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  • Bac, Mehmet

Abstract

The relation between economic inequality and trust is studied in a model where the ability to elicit trustworthiness from unrelated people depends on own wealth as well as the distribution and mean of population wealth. In equilibrium, the rich trust but betray while the poor do not trust but are trustworthy. Homogenizing wealth around its mean leads to a zero-trust outcome if mean wealth is sufficiently low, to full trust if mean wealth is large. More effective enforcement technologies increase, more effective counter-enforcement technologies decrease trust. Economic inequality reinforces itself through the trust and betray incentives it induces, suggesting a beneficial role for redistributive policies.

Suggested Citation

  • Bac, Mehmet, 2009. "Generalized trust and wealth," International Review of Law and Economics, Elsevier, vol. 29(1), pages 46-56, March.
  • Handle: RePEc:eee:irlaec:v:29:y:2009:i:1:p:46-56
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    References listed on IDEAS

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    Cited by:

    1. Ng’ang’a, Stanley Karanja & Bulte, Erwin H. & Giller, Ken E. & Ndiwa, Nicholas N. & Kifugo, Shem C. & McIntire, John M. & Herrero, Mario & Rufino, Mariana C., 2016. "Livestock wealth and social capital as insurance against climate risk: A case study of Samburu County in Kenya," Agricultural Systems, Elsevier, vol. 146(C), pages 44-54.
    2. Gilles Grolleau & Sana El Harbi & Hayet Saadaoui & Angela Sutan, 2016. "The Interplay Of Inequality And Reference Dependence With Trust An Experimental Study," Bulletin of Economic Research, Wiley Blackwell, vol. 68(2), pages 117-123, April.

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